Natural Resources Economic Value

Assigning Economic Value to Conservation

They call this “new.” In reality, the Global Resource Bank has been advocating this geoist idea for more than eight years! Still, it is nice to see people catch up.

By Wesley Gibbings

A group of leading scientists, thinkers and policy makers is proposing a new global system to measure the economic value of unexploited forests through the formulation of a mechanism being described as “forest capital”.

The proposal was explored here Tuesday by Indonesian co-chairman of the World Commission on Forests and Sustainable Development, Professor Emil Salim.

Salim, a former government minister in his native Indonesia, says it is possible to divide world forest users into two main groups — exploiters and conservers.

Exploiters tend to focus on the ability of forests to deliver timber, land for agriculture and abundant mining possibilities. “These people are interested in getting rid of forests,” he says.

Conservers, on the other hand, are interested in forests as watersheds, habitats for people and animal species, as absorbers of carbon and for eco-tourism.

The latter group’s interests are not often given governmental attention because an economic value is not usually attached to the use of forests for those purposes.

Fellow commission member, American scholar Dr George Woodwell, adds that “governments are weak when it comes to protecting the public interests against commercial interests.”

Salim’s suggestion is that countries be rewarded for not exploiting forests through the development of a concept called “forest capital” which would be calculated as a product of the opportunity cost of not exploiting these resources on a sustainable basis.

A value would thus be placed on the income foregone through not exploiting the forests and “forest capital credits” granted by international financial agencies. This, he says, would open the door for “moving forest surfaces into the market economy.”

Commission co-chairman, former Swedish Prime Minister Ola Ullsten, agrees with this thesis and suggests that forestry products are, in any event, grossly under-valued.

“We have almost systematically under-valued forestry products,” he says.

He suggests that it is time for greater focus on “ecological capital” as a concept at the heart of the development process.

In the past, people thought of human needs only in terms of consumer goods, but the importance of natural resources ought now to take centre stage, Ullsten says.

“What is at the core of environmental degradation is the failure to understand the importance of sustainable development. A stable and secure environment is a basic human need,” he argues.

Ullsten says the Commission has also come to the realisation that not only are forests declining but that the products and services provided by the forests are also disappearing.

He points to the fact that more people use forests as habitats than the entire population of the United States of America.

“We live in a full world. We cannot anymore justify deforestation.” He adds that the situation was “a crisis requiring urgent attention” and that since the 1992 Rio Summit, more than 90 million hectares of forest have been lost.

He predicts that before the end of the decade, another 30 million hectares could be lost, a situation that he says has the potential to “change the character of the planet”.

What is also evident, he adds, is that “the causes of the crisis have their roots in human institutions.”

“We can reverse it, or we can worsen it,” he says. “We are not only accidentally causing forest decline, but deliberately doing so.”

To change the situation, Ullsten suggests that sacrifices will have to be made. He says just as the world had moved from an industrial to a post-industrial age, there should now be a move from non-sustainable to sustainable society.

Changes in capital consumption “will lead us into a more stable society environmentally,” he says.

In that regard, he says he is encouraged by some positive signals, especially “rising awareness among young people” and in some business communities.

Ullsten revealed that the Report of the Commission, to be completed in the coming months, will recommend that the world “get the prices of forests right.”

He says it is also necessary to “get planning right” with governments setting aside “areas we want to protect.”

The Commission co-chairman says it is important, as well, that the world “get the ethics right” and that old positions have to change. This, he says, almost certainly means “a case of more solidarity between North and South for the benefit of all of us.”

The Commission was appointed following the Earth Summit held in Rio de Janeiro, Brazil in 1992.

What’s your opinion on this initiative to assess the value of “forest capital”? Tell The Progress Report what you think!

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7 Responses to Natural Resources Economic Value

Hey! This is kind of off topic but I need some help from an established
blog. Is it tough to set up your own blog? I’m not very techincal but I can figure things out pretty quick.
I’m thinking about making my own but I’m not sure where to begin.

i believe that forests are am important resource to a countrys economy and should a valued according to the wildlife resources available. More value should be placed on forests containing animal or plant species of high value. Forests containing animals that are endemic to the area should a ranked among the highest in value.

The forest capital will need to be taken seriously by governments that will help in following the rules and regulations of how and when the forest capital must be used.this will help in making sure that there is a balanced sustainablity of exploiting and conservating natural resource values.

This is perhaps the only way that the forests in the poor countries can be saved. The governments of poor countries do not have the vision for recognising the long-term economic benfits of a particular rainforest, which can be obatined through medicinal products, wild food, forest tourism let alone recognising the environmental services that forests provide like carbon dioxide use and oxygen production, air cleaning, fertilising the soil, cotrolling erosion, habitats for wildlife, etc. Therefore, I believe this initiative may reduce forest loss.

I am a sutdent at the Catholic Institut of Madagascar. I study about Forest economic. My subject for a PHD resech is about it.I think, it is very necessary to know the economic value of forest conserved.

Excelent idea Mr…We MUST stop exploiting the world’s natural resources, otherwise there will be nothing left. What would the capitalists do then? There should also be more government spending on growing trees and more government restrictions

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Arts & Letters

Geonomics is …

a manual. The world did not come without a way for people to prosper, and the planet to heal and stay well; that way is geonomics. Economies are part of the ecosystem. Both generate surpluses and follow self-regulating feedback loops. A cycle like the Law of Supply and Demand is one of the economy’s on/off loops. Our spending for land and resources – things that nobody made and everybody needs – constitutes our society’s surplus. Those profits without production (remember, nobody produced Earth) can become our commonwealth. To share it, we could pay land dues in to the public treasury (wouldn’t oil companies love that?) and get rent dividends back, a la Alaska’s oil dividend. Doing so let’s us axe taxes and jettison subsidies. Taxes and subsidies distort price (the DNA of exchange), violate quid pro quo by benefiting the well-connected more than anyone else, reinforce hierarchy of state over citizen, and are costly to administer (you don’t really need so much bureaucracy, do you?). Conversely, land dues motivate people to not waste sites, resources, and the ecosystem while rent dividends motivate people to not waste themselves. Receiving this income supplement – a Citizens Dividend – people can invest in their favorite technology or outgrow being “economan” and shrink their overbearing workweek in order to enjoy more time with family, friends, community, and nature. Then in all that free time, maybe we could figure out just what we are here for.

shaped by reality. In the 1980′s, the Swedish government doubled its stock transfer tax. Tax receipts, however, rose only 15%, since traders simply fled to London exchanges. Fearing a further exodus, the Swedish government quickly rescinded the tax altogether. (The New York Times, April 20) That willingness to tax anything leads us astray. Pushing us astray is that unwillingness to pay what we owe: rent for land, our common heritage. Assuming land value is up for grabs, we speculate. We cap the property tax on both land and buildings and the rate at which assessments can go up; while real market values rise quicker, assessments can never catch up. Our stewards, the Bureau of Land Management, routinely sell and lease sites below market value, often to insiders, says the Government Accounting Office. Once we grasp that rent is ours to share, we’ll collect it all, rather than let it enrich a few, and quit taxing earnings, which do belong to the individual earner. That shift is geonomic policy.

a study of a phenomenon David Ricardo noted going on two centuries ago. When wine grapes rise to $10,000 a ton from the very best land (last year, cabernet sauvignon commanded an average of $4,021 a ton in the Napa Valley), then vineyard prices soar from $18,000 an acre in the 1980′s to $100,000 an acre five years ago and now for a top pedigree up to $300,000 an acre (The New York Times, April 9, via Wyn Achenbaum). Pricey land does not make wine pricey; spendy wine makes land spendy. While vintners make their wine tasty, nature and society in general – not any lone owner – make land desireable. Steve Kerch of CBS’s MarketWatch (April 5) notes that much of what a home sells for on the open market is a reflection of intangible factors such as what school district the house sits in. The price the builder has to pay for the land also tends to be driven by the same intangibles. Because the value of land comes from society, and because one’s use excludes the rest of society, each user owes all others compensation, and is owed compensation by everyone else. Sharing land’s value, instead of taxing one’s efforts, is the policy of geonomics.

a way to connect the dots. Making the cyber rounds is “The Cavernous Divide” by Scott Klinger, from AlterNet (posted March 21): “As the number of billionaires in the world expands, so does the number of those in poverty.” Duh. The yawning income gap is not news. Nearly every issue of our quarterly digest carries a similar quote. Yet the connection was worked out long ago by one of America’s greatest thinkers, Henry George, who labeled his masterpiece, Progress and Poverty. Techno- and socio-advances always enrich few and impoverish many. Yet progress also pushes up location values – the geonomic insight (is Silicon Valley cheaper now or more expensive?). Instead of taxing income, sales, or buildings, society could collect those values of sites, resources, EM spectrum, and ecosystem services via fees and dues, which would lower the income ceiling, and instead of lavishing corporate welfare, pay out the recovered revenue via dividends, which would jack up the income floor. Dots connected.

of interest to Dave Lakhani, President Bold Approach (Mar 8) and Matt Ozga (Jan 29): “I write for the Washington Square News, the student run newspaper out of New York University. Geonomics seems like it has great significance, especially in this area. When was geonomics developed, and by whom?”
About 1982 I began. Two years later, Chilean Dr Manfred Max-Neef offered the term geonomics for Earth-friendly economics. In the mid-80s, a millionaire founded a Geonomics Institute on Middlebury College campus in Vermont re global trade. In the 1990s, CNBC cablecast a show, Geonomics, on world trade as it benefits world traders. My version of geonomics draws heavily from the American Henry George who wrote Progress & Poverty (1879) and won the mayoralty of New York but was denied his victory by Tammany Hall (1886). He in turn got lots from Brits David Ricardo, Adam Smith, and the French physiocrats of the 1700s. My version differs by focusing not on taxation but on the flow of rents for sites, resources, sinks, and government-granted privileges. Forgoing these trillions, we instead tax and subsidize, making waste cheap and sustainability expensive. To quit distorting price, replace taxes with “land dues” and replace subsidies with a Citizens Dividend.
Matt: “This idea of sharing rents sounds, if not explicitly socialist, at least at odds with some capitalist values (only the strong survive & prosper, etc). Is it fair to say that geonomics has some basis in socialist theory?”
A closer descriptor would be Christian. Beyond ethics into praxis, Alaska shares oil rent with residents, and they’re more libertarian than socialist. While individuals provide labor and capital, no one provides land while society generates its value. Rent is not private property but public property. Sharing Rent is predistribution, sharing it before an elite or state has a chance to get and misspend it, like a public REIT (Real Estate Investment Trust) paying dividends to its stakeholders – a perfectly capitalist model. What we should leave untaxed are our sales, salaries, and structures, things we do produce.

an alternative to conventional land trusts. Just as it seems some functions should not be left to the market – private courts and cops invite corruption (while private mediation is fine) – just so some land should not be left in the market. That said, sacred sites do not make much of a model for treating the vast acreage of land that we need to use. So the usual trust model, which is anti-use and counter-market, can not apply where it’s needed most. Trust proponents worry about ownership and control – two very human ambitions – but they’re not central. Supposedly, we the people own millions acres – acres that private corporations treat as private fiefdoms – and conversely, the Nature Conservancy owns wilderness the public can some places use as parks. So, the issue is not who owns but who gets the rent – ideally, all of us.

a scientific look at how we divvy up the work and the wealth, how some of us end up with too much or too little effort or reward. That’s partly due to Ricardo’s Law of Rent, showing how wasteful use of Earth cuts wages. And it’s partly due to how a society’s elite runs government around like water boys, dishing out subsidies and tax breaks. While geonomists look political reality right in the eye, without blinking, conventional economists flinch. When Paul Volcker, ex-chief of the Federal Reserve, moved on to a cushy professorship at Princeton cum book contract, the crush of deadlines bore down. So Volcker asked a junior associate to help with the book. The guy refused, explaining that giving serious consideration to policy would ruin his academic career. The ex-Fed chief couldn’t believe it and asked the department chair if truly that were the case. That head honcho pondered the question then replied no, not if he only does it once. And economics was AKA political economy!

a scientific look at how we divvy up the work and the wealth, how some of us end up with too much or too little effort or reward. That’s partly due to Ricardo’s Law of Rent, showing how wasteful use of Earth cuts wages. And it’s partly due to how a society’s elite runs government around like water boys, dishing out subsidies and tax breaks. While geonomists look political reality right in the eye, without blinking, conventional economists flinch. When Paul Volcker, ex-chief of the Federal Reserve, moved on to a cushy professorship at Princeton cum book contract, the crush of deadlines bore down. So Volcker asked a junior associate to help with the book. The guy refused, explaining that giving serious consideration to policy would ruin his academic career. The ex-Fed chief couldn’t believe it and asked the department chair if truly that were the case. That head honcho pondered the question then replied no, not if he only does it once. And economics was AKA political economy!

one of many words I coined over 20 years ago: geoism, geonomics, geonomy, geocracy, etc – neologisms that later others came up with, too. CNBC once had a Geonomics Show, and Middlebury College has a Geonomics Institute. If “economy” is literally “management of the household”, then geonomy is “management of the planet”. The kind of management I had in mind is not what CNBC was thinking – top-down. My geonomics is not hands-on, interfering, but hands-off, organic. It’d strive to align policy with natural processes, similar to what holistic healing does in medicine, what organic farming does in agriculture. Geonomics attends to two key components: One, the crucial stuff to track is fat – or profit, especially profits without production, such as rent, or all the money we spend on the nature we use. Society’s surplus is the sine qua non for growth, needed to counter death – not merely more, but sustainable development, more from less. Two, the basic process to respect is the feedback loop. These let nature maintain balance automatically and could do the same for markets, if we let them. Letting them would turn our economies, now our masters, into a geonomy, our servant, providing us with prosperity, eco-librium (to coin a term) and leisure, time off – a hostile environment for economan but a cradle for a loving and creative humanity.

shaped by reality. In the 1980′s, the Swedish government doubled its stock transfer tax. Tax receipts, however, rose only 15%, since traders simply fled to London exchanges. Fearing a further exodus, the Swedish government quickly rescinded the tax altogether. (The New York Times, April 20) That willingness to tax anything leads us astray. Pushing us astray is that unwillingness to pay what we owe: rent for land, our common heritage. Assuming land value is up for grabs, we speculate. We cap the property tax on both land and buildings and the rate at which assessments can go up; while real market values rise quicker, assessments can never catch up. Our stewards, the Bureau of Land Management, routinely sell and lease sites below market value, often to insiders, says the Government Accounting Office. Once we grasp that rent is ours to share, we’ll collect it all, rather than let it enrich a few, and quit taxing earnings, which do belong to the individual earner. That shift is geonomic policy.